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Daily Archives: February 26, 2014

Economic Crisis and Share Price Unpredictability: Reasons and Implications

Fox, Edward G. and Fox, Merritt B. and Gilson, Ronald J., Economic Crisis and Share Price Unpredictability: Reasons and Implications (February 19, 2014). Columbia Law and Economics Working Paper No. 468; Stanford Law and Economics Olin Working Paper Forthcoming; ECGI – Law Working Paper Forthcoming. Available at SSRN: http://ssrn.com/abstract=2401712

“During the recent financial crisis, there was a dramatic spike, across all industries, in the volatility of individual firm share prices after adjustment for movements in the market as a whole. In this Article, we demonstrate that a similar spike has occurred with each major downturn in the economy since the 1920s. The existence of this long history of crisis-induced spikes has not been previously recognized.
The Article evaluates a number of potential explanations for these recurrent spikes in firm-specific price volatility, a pattern that poses a puzzle in terms of existing financial theory. The most convincing explanations relate to reasons why information specifically concerning individual firms would become more important in difficult economic times. This discovery of a long history of crisis-induced spikes in firm-specific price volatility has important implications for several areas of corporate and securities law. With regard to securities law, the Article concludes, for example, that because of these spikes, private damages actions are much less effective deterrents to corporate misstatements and insider trading in crisis times than in normal times. Consequently, substantial additional resources should be devoted to SEC enforcement actions during crisis times. The Article considers as well the most contentious corporate law issue of the last 30 years: the extent to which a target board of directors will be allowed to prevent shareholders from accepting a hostile takeover bid at a premium over the pre-bid share price. The Delaware Supreme Court’s approach to this question has been largely based on the difficult-to-define concept of “substantive coercion.” The Article concludes that these spikes could be a way of giving real meaning to the “substantive coercion” justification for board approval of defenses against hostile takeover attempts, but that the instances where this justification is appropriate will be rare.”

Offshore Tax Evasion: The Effort To Collect Unpaid Taxes On Billions In Hidden Offshore Accounts

Report by the Permanent Subcommittee on Investigations (PSI) of the United States Senate, Majority and Minority Staff, February 26, 2014: Offshore Tax Evasion: The Effort To Collect Unpaid Taxes On Billions In Hidden Offshore Accounts. “…On the negative side of the ledger, despite evidence of widespread misconduct by Swiss banks in facilitating U.S. tax evasion, Switzerland hasContinue Reading

How States Are Reclaiming Revenue Lost to Offshore Tax Havens

U.S. PIRG - Closing the Billion Dollar Loophole - How States Are Reclaiming Revenue Lost to Offshore Tax Havens: “Every year, corporations use complicated gimmicks to shift U.S. earnings to subsidiaries in offshore tax havens – countries with minimal or no taxes – in order to reduce their state and federal income tax liability by billions of dollars.Continue Reading

The Declassification Engine

Computational Analysis of Official Secrecy - a project by historians, data scientists, legal scholars, and transparency advocates from Columbia University:  “The enormous growth in the number of official documents – many of them withheld from scholars and journalists even decades later – has raised serious concerns about whether traditional research methods are adequate for ensuring government accountability. ButContinue Reading

EPIC – Supreme Court Allows Warrantless Search of Home

“In a case that narrows the warrant requirement for searches of homes, the Supreme Court upheld the warrantless search of a suspect’s home by the LAPD after the person objected. In Fernandez v. California, the officers returned to the apartment of the resident after he had been arrested, and obtained consent from a roommate to conductContinue Reading

Pew – Indians Want Political Change

“Seven-in-ten Indians are dissatisfied with the way things are going in India today, according to a new Pew Research Center survey. And, with the Indian parliamentary elections just weeks away, the Indian public, by a margin of more than three-to-one, would prefer the Hindu-nationalist opposition Bharatiya Janata Party (BJP) to lead the next Indian governmentContinue Reading

Pew – The Internet and Religion

“At the National Religious Broadcasters Convention, Lee Rainie, director of the Pew Research Center’s Internet Project, reported the Project’s latest findings about how Americans use digital technology and their implications for religious institutions: “There is no neutral position when it comes to the Internet. Whether you use it or you don’t, it still affects your organization. IfContinue Reading

New GAO Reports – Managing Defense IT, Military Health System, Retirement Security

INFORMATION TECHNOLOGY: Leveraging Best Practices and Reform Initiatives Can Help Defense Manage Major Investments, GAO-14-400T: Published: Feb 26, 2014. Publicly Released: Feb 26, 2014: “The federal government reportedly plans to spend at least $82 billion on IT in fiscal year 2014. Of that, Defense plans to spend over $39 billion—$5.5 billion on classified systems, $9 billion on acquisitions,Continue Reading

Series – Inside Detroit’s Nascent Start-Up Culture

Tim Alberta writes in a new series in the National Journal: “It started as a school project for Veronika Scott, who at age 20 was studying design downtown at the College for Creative Studies. One of Scott’s professors challenged students to create a design that would meet people’s “needs” instead of just following “trends.” So, Scott, aContinue Reading

Offshore wind farms could tame hurricanes before they reach land, Stanford-led study says

Bjorn Carey, Stanford News Service: “Computer simulations by Professor Mark Z. Jacobson have shown that offshore wind farms with thousands of wind turbines could have sapped the power of three real-life hurricanes, significantly decreasing their winds and accompanying storm surge, and possibly preventing billions of dollars in damages.  For the past 24 years, Mark Z. Jacobson, aContinue Reading